Alcohol tax hiked to tackle binge drinking

Excise duty on alcohol is to rise by six percentage points above inflation from midnight on Sunday in a bold effort to curb Britain's steadily creeping drinking habit, the chancellor revealed today.

Duty on a pint of beer will rise by 4p, cider by 3p a pint, wine by 14p a bottle and spirits by 55p a bottle. After that, duties will continue to rise by two percentage points above inflation for each of the following four years.

The move is unlikely to have an immediate impact on cut-price promotions in supermarkets, which are close to record lows ahead of St Patrick's Day and Easter — two big drinking occasions, both of which fall next week.

Even before Alistair Darling stood up in the Commons today, Tesco, which sells more alcohol in the UK than any other pub group or retailer, had launched a major TV advertising campaign pushing a cut-price promotion on big name beers.

£10 multi-pack "slabs" of canned Fosters, Green King IPA, Guinness or Stella Artois are on special offer at "two for £16". The offer equates to 58p a pint on some brands. By contrast, the average price of a pint of beer sold in a pub last year was £2.64, according to the BBPA.

Two years ago Britain's largest brewer Scottish & Newcastle made a formal submission to the Competition Commission complaining that many supermarket special offers were "not consistent with the promotion of responsible drinking". The consumer watchdog took no action.

Three weeks ago Tesco said chief executive Terry Leahy had told the prime minister he believed new laws were required to ban the sale of cut-price alcohol.

Elsewhere, the chancellor's duty rise is likely to be a major blow for Britain's pub industry, which is already in the middle of its worst trading period in working memory. Its strength sapped by supermarket price cuts, it is also reeling from new smoking ban laws.

Rob Hayward, chief executive of the British Beer and Pub Association (BBPA), said: "The government is punishing all beer drinkers rather than punishing the minority of drunken hooligans.

"Its policy is fuelling Britain's binge drinking problem by driving people away from beer, out of the pub into the arms of the deep discounting supermarkets." He claimed the price of some pints could climb to £6.50 by the time London hosts the 2012 Olympics.

But the British Medical Association gave the chancellor's move a warm welcome. Dr Vivienne Nathanson, the BMA's head of science and ethics, said: "These tax increases may be unpopular with some members of the public but we hope that they will look at the wider issue and recognise that the UK has a real problem on its hands regarding alcohol misuse. Tough action is needed."

Despite steady rises in alcohol consumption in Britain, the nation's 57,500 pubs have been losing out for years. Share prices of the major pub groups have at least halved in the last nine months and pub closures are running at about four a day, according to the BBPA.

Despite shrinking beer sales, pubs last month also faced a 4.2% hike in wholesale beer prices after Scottish & Newcastle was forced to pass on rising barley, energy and other input costs. Competitors introduced similar rises.

Beer industry leaders believe sales in supermarkets and off licences will overtake beer sold in Britain's pubs for the first time this year.

Pub stocks were surprisingly resilient after the chancellor delivered his budget today. Analysts suggested the widely trailed duty hike was a relatively minor problem for the industry when set against price attacks from supermarkets, the smoking ban, rising costs of brewing and declining consumer confidence.

Treasury figures show the chancellor has pencilled in additional duty to add £400m to his coffers by April 2009, and a further £1.13bn for the subsequent two years. This makes it the biggest revenue-raising measure announced by Darling on Wednesday.

Budgets in the last decade have consistently kept beer and wine excise duty in line with inflation while freezing the duty on spirits. This was widely understood as a "tax fairness" initiative designed to redress a long-standing imbalance between spirit, on the one hand, and beer and wine on the other. In the early 1990s alcohol in spirits attracted about twice the excise duty as the sale amount of alcohol in beer. A series of tax freezes on spirits have left the category taxed at 40% higher than beer.

As chancellor, Gordon Brown briefly broke with an established trend in alcohol duties, using his 2002 budget to intervene in the alcohol misuse debate. He reclassed the tax treatment of alcopops — then at the centre of the public debate on binge-drinking — in a move that effectively hiked duty by 43% substantially, hastening the demise of the fad.

Edwin Atkinson of the Gin and Vodka Association said alcopops were then "the whipping boy" for government, particularly after they were linked with underage drinking by senior medical advisers. At the peak of their popularity, Atkinson said, alcopops only accounted for 3% of alcohol drunk in Britain, and now account for less than 2%.

In fact, drinks categories that have dominated the rise in alcohol consumption since the war have been spirits, wine and, to a lesser extent, cider.

Darling's departure from established treatments of alcohol excise duty in past budgets comes after a concerted lobbying campaign in the last six months led by the BMA. Last month it published a damning analysis of the government's approach to what it called "the UK epidemic of alcohol misuse".

Despite the UK already having one of the highest excise duty rates in Europe, the BMA called for tax rises in line with increases in alcohol consumption. It pointed to research suggesting a 10% price hike would lead to a 10% reduction in consumption.

It claimed the government's collaborative approach with the drinks firms on measures to tackle problem drinking — focused on promoting awareness advertising and education — were failing because of the industry's vested interests.

"It is essential that the UK government moves away from partnership with the alcohol industry and looks at effective alternatives to self-regulation that will ensure there is a transparent policy development that is based on reducing the harm related to alcohol misuse." Tax and restriction of supply are the most effective measures, the BMA insists.

In private, even the most progressive drinks industry leaders argue prescriptive health-led policy on problem drinking is massively out of step with public opinion and behaviour — even behaviour among highly informed groups such as doctors and nurses.

The Association of Convenience Stores said increasing duty on alcohol above the rate of inflation will only aggravate the problem of bootleg booze smuggled in from lower tax regimes on the continent.